‘Sugar tax’ hits 326 soft drinks firms but won’t raise forecast £520m

A total of 326 soft drinks manufacturers have been affected by the so-called ‘sugar tax’ since it was introduced in April this year, official figures have revealed.

However, the amount of money raised by the new levy won’t be as high as originally forecast because firms are rapidly reformulating their products.

The Soft Drinks Industry Levy came into force on 6 April this year and taxes manufacturers 18p per litre if the drink contains five grams of sugar per 100ml and 24p per litre for more than eight grams of sugar.

But accountancy firm UHY Hacker Young said HMRC was now expected to raise £240m per year for the government from the levy, down from the £520m originally expected. The cash is set to be spent on school sports.

Companies such as AG Barr, which manufactures Irn Bru, have been quick to reformulate their products.

Irn Bru’s sugar content has fallen from 10.3g/100ml to 4.7g/100ml. AG Barr claims that 99% of its products are now not subject to the ‘sugar tax’.

The government is now expected to take money from other government budgets to ensure the full £520m is made available for school sports.

James Simmonds, partner at UHY Hacker Young and head of the firm’s drinks industry team, said: “Targeted taxes like the ‘sugar tax’ might have very noble aims, but they do run counter to the aim of simplifying the tax system.”

“The evidence of health benefits from these taxes is relatively limited, but the sugar tax certainly adds to the burden of cost and red tape for businesses.”

“It’s good to see the soft drinks manufacturers responding so positively to the new tax – reducing sugar levels in drinks makes sense financially, given the potential cost of the levy.”

“It does remain to be seen how the government will make up the £280m shortfall in money for school sports, however.”